04 September 2017
In November 2012 exam of CA final there was a question relating to taxation in case of foreign residents : it is given in solution that Poulomi should receive her entire salary in singapore & then remit the required amount to her bank account in kolkata in which case, the salary earned by her in singapore would not be subject to tax in India. However, this is contrary to Madras high court judgement in case of CIT vs AP kalyankrishnan. Kindly explain which is correct.
05 September 2017
Contrary view is very much possible. So far as international taxation is concerned, there are 2 basic rules. 01. Rule of residence and 02. Rule of Originating income. Rule of residence says that the country in which the person is resident has the authority to tax the income. (India in Poulomi's case) Rule of originating income says that the country where the income is originated has the authority to tax the said income.(Singapore in Poulomi's case) In such a situation, the Court goes by the degree of wisdom. If wisdom prevails, when the person is delivering services in India, who is also resident in india.... in such case the employer should not entertain the request of paying salary at Singapore. But due to the extra smartness of few of the tax practitioners, employer do undergo such a practice of so called tax planning......and then the Court goes by degree of wisdom. And hence may appear to be contradiction.......... ........ ..........your views please.
05 September 2017
In kalyankrishnan case Madras high court held that pension earned in Malaysia was transferred directly to bank account of assessee in India is as a matter of convenience no part of it could be deemed to be received in India as it had already been earned in Malaysia and transferred directly to bank account in India for the convenience of the assessee, assesee had the option to receive the amount in a bank acount in Malaysia then to remit the amount to his bank account in india but that would have caused unnecessary inconvenience to assesee.
I just want to confirm whether i can write the same in case of paoulomi that salary transferred directly to her bank account in India will not be liable to tax in India as salary has been earned in Singapore and received in indian bank account as a matter of convenience and no part of it could be deemed to be received in India and made liable to tax in india referring the kalyankrishnan judgement.
06 September 2017
the service is rendered in India. So India has every right to tax the said income. It hardly matters if it is paid in India or outside India.
06 September 2017
No, poulomi is working in Singapore, she has rendered her services in Singapore to her employer. Salary is earned in Singapore & salary has been transferred to her bank account in kolkata directly. The question is whether it can be made liable to tax in india on the context that it has been received in India.
06 September 2017
The proof of onus would be the major consideration....which may please NOTE. If the salary is directly credited in Indian Bank account, Kolkata..... the onus of proof that the same is earned outside India will be with Poulumi. If the salary is remitted to Indian Bank account, Kolkata branch, the onus of proof that the same is earned in India will be with Income Tax department. Accordingly you take the call.
CAclubindia
